Delaware | 1-13429 | 94-3196943 | ||
(State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-2) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. 13e-4(c)) |
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
Simpson Manufacturing Co., Inc. | ||||
(Registrant) | ||||
DATE: | October 29, 2018 | By | /s/ Brian J. Magstadt | |
Brian J. Magstadt | ||||
Chief Financial Officer |
l 2018 third quarter earnings of $0.95 per diluted share increased 61.0% year-over-year | |
l Repurchased $24.1 million of the Company's common stock during the third quarter | |
l Declared a $0.22 cash dividend |
• | Consolidated net sales of $284.2 million increased 8.3% from $262.5 million. |
◦ | North America net sales of $239.9 million increased 12.5% from $213.3 million, primarily due to increases in average product prices and sales volume. Canada's net sales were negatively affected by foreign currency translation. |
◦ | Europe net sales of $42.0 million decreased 10.9% from $47.1 million, primarily due to the late 2017 sale of Gbo Fastening Systems' Poland and Romania subsidiaries (acquired in January 2017), which contributed $5.3 million in net sales for the third quarter of 2017. Europe net sales were negatively affected by approximately $0.7 million of foreign currency translations resulting from Europe currencies weakening against the United States dollar. In local currency, Europe net sales increased primarily due to increases in average product prices. |
• | Consolidated gross profit of $133.9 million increased 12.4% from $119.1 million. Gross profit margin increased to 47.1% from 45.4% primarily due to an increase in average product prices, which decreased both material and factory and overhead costs as a percentage of net sales. |
◦ | North America gross profit margin increased to 48.8% from 47.3%. |
◦ | Europe gross profit margin of 38.2% was approximately flat. |
• | Consolidated income from operations of $60.9 million increased 30.5% from $46.7 million. Income from operations for the third quarter of 2018 included a $1.6 million foreign currency gain on a return of capital from an investment in a foreign subsidiary, partially offset by increased SAP related expenses of $1.3 million. Consolidated operating profit margin increased to 21.4% from 17.8%. |
◦ | North America income from operations of $56.9 million increased 36.1% from $41.8 million. Included in North America’s income from operations were SAP related costs of approximately $2.0 million compared to $0.5 million in the third quarter of 2017. |
◦ | Europe income from operations of $3.6 million decreased 30.3% from $5.1 million. Europe income from operations for the third quarter of 2018 was negatively impacted by the late 2017 sale of Gbo Fastening Systems' Poland and |
• | The Company's effective income tax rate decreased to 27.1% from 37.0%, primarily due to the U.S. Tax Cuts and Jobs Act of 2017, which reduced the United States statutory federal corporate tax rate from 35% to 21%. |
• | Consolidated net income was $44.4 million, or $0.95 per diluted share of the Company's common stock, compared to net income of $28.2 million, or $0.59 per diluted share of the Company's common stock. The $28.2 million consolidated net income for the three months ended September 30, 2017 was negatively impacted by a nonrecurring $2.1 million reduction of a gain on a bargain purchase of a business, which decreased diluted earnings per share for the same period by $0.04. |
• | Consolidated net sales of $837.0 million increased 12.3% from $745.3 million. |
◦ | North America net sales of $705.9 million increased 15.2% from $612.8 million, primarily due to increases in sales volume as well as average product prices. Canada's net sales were positively affected by foreign currency translation. |
◦ | Europe net sales of $124.1 million decreased 2.1% from $126.8 million, primarily due to reduced sales volume as a result of to the late 2017 sale of Gbo Fastening Systems' Poland and Romania subsidiaries (acquired in January 2017), which contributed $12.6 million in net sales for the nine months ended September 30, 2017. Europe net sales were positively impacted by approximately $6.4 million of foreign currency translations resulting from Europe currencies strengthening against the United States dollar. In local currencies, Europe net sales increased primarily due to increased sales volume and average product prices. |
• | Consolidated gross profit of $382.1 million increased 12.0% from $341.5 million. Gross profit margin as a percentage of net sales of 45.7% was approximately flat. |
◦ | North America gross profit margin as a percentage of net sales decreased to 47.5% from 48.1%. |
◦ | Europe gross profit margin of 36.3% was approximately flat. |
• | Consolidated income from operations of $154.5 million increased 34.9% from $114.5 million. Income from operations for the nine months ended September 30, 2018 included a $1.6 million foreign currency gain on a return of capital from an investment in a foreign subsidiary and a $1.0 million gain due to the resolution of an eminent domain claim, and was negatively impacted by severance costs of $2.8 million and increased SAP related expenses of $5.6 million. As a percentage of net sales, consolidated income from operations increased to 18.5% from 15.4%. |
◦ | North America income from operations of $151.3 million increased 36.9% from $110.5 million. Included in North America’s income from operations were SAP related costs of approximately $7.0 million compared to $1.1 million in the nine months ended September 30, 2017. |
◦ | Europe income from operations of $4.8 million, which included severance costs of $2.0 million recorded in general and administrative expense and decreased foreign currency gains of $2.4 million, decreased 35.7% from $7.4 million. Europe income from operations for the nine months ended September 30, 2018 was negatively impacted by the late 2017 sale of Gbo Fastening Systems' Poland and Romania subsidiaries (acquired in January 2017), which contributed $1.2 million in income from operations for the nine months ended September 30, 2017. |
• | The Company's effective income tax rate decreased to 26.1% from 34.0%, primarily due to the U.S. Tax Cuts and Jobs Act of 2017, which reduced the United States statutory federal corporate tax rate from 35% to 21%. The effective income tax rate for the nine months ended September 30, 2017 was also reduced by a nonrecurring gain on a bargain purchase related to the Gbo Fastening Systems acquisition, which was not taxable. |
• | Consolidated net income was $113.9 million, or $2.43 per diluted share of the Company's common stock, compared to net income of $79.5 million, or $1.66 per diluted share of the Company's common stock. The $79.5 million consolidated net |
• | Cash flow provided by operating activities increased approximately $20.0 million to approximately $105.0 million from $84.6 million. |
• | Cash flow used in investing activities decreased approximately $22.0 million to approximately $41.0 million from $62.8 million. Capital expenditures were approximately $25.0 million compared to $45.1 million. The Company did not make any asset acquisitions in the first nine months of 2018 compared to $27.9 million of asset acquisitions, net of cash received, in the prior year period. |
• | Effective July 1, 2018, the Company increased prices on a majority of its wood connector products sold in the United States by an average of 11.5% in an effort to offset rising raw materials costs. |
• | During the third quarter of 2018, the Company repatriated $20.0 million from one of its foreign subsidiaries. The Company is evaluating whether to repatriate additional funds from its foreign subsidiaries in the fourth quarter of 2018 or the first half of 2019. |
• | In September 2018, the Company contracted to sell a facility that is not occupied by it and the Company leased to a third party. The sale is expected to close in November 2018. The Company estimates it will receive net proceeds of approximately $16.0 million, after closing costs and sales price adjustments. |
• | On October 22, 2018, the Company’s Board of Directors (the "Board") declared a quarterly cash dividend of $0.22 per share. The dividend will be payable on January 24, 2019 to the Company's stockholders of record as of January 3, 2019. On October 22, 2018, the Board resolved for the 2019 annual meeting of the Company's stockholders to be held on April 26, 2019 (or such dates to which such meeting may be adjourned) and fixed the close of business on February 27, 2019, as the record date for the determination of stockholders entitled notice of, and to vote at, the annual meeting. |
• | During the third quarter of 2018, the Company repurchased 357,465 shares of the Company's common stock in the open market at an average price of $67.28 per share, for a total of $24.1 million. |
• | In October 2018, the Company repurchased an additional 528,100 shares of the Company's common stock in the open market at an average price of $68.26 per share, for a total of $36.0 million. As a result, as of October 29, 2018, approximately $65.4 million remained available for share repurchase through December 31, 2018 under the Company's previously announced $275.0 million share repurchase authorization. |
• | The Company currently believes the market price for steel could continue to be volatile during the fourth quarter of 2018, due to uncertainty related to steel tariffs. |
• | The Company is updating its 2018 full-year gross profit margin estimate to be in the range of approximately 45.5% to 46.0% from its previous estimate of 45.0% to 46.0%. |
• | The Company estimates that its 2018 full-year effective tax rate will be between approximately 26% to 27%, including both federal and state income tax rates. The ultimate impact of the Tax Cuts and Jobs Act signed into law in 2017 and the Company's 2018 effective tax rate may differ materially from the Company’s estimates due to changes in the interpretations and assumptions made by the Company as well as additional regulatory guidance that may be issued and actions the Company may take as a result of the Tax Cuts and Jobs Act, such as cash repatriation to the United States. The Company will continue to assess the expected impact of the new tax law and provide additional disclosures at appropriate times. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net sales | $ | 284,178 | $ | 262,476 | $ | 836,964 | $ | 745,345 | |||||||
Cost of sales | 150,282 | 143,338 | 454,881 | 403,866 | |||||||||||
Gross profit | 133,896 | 119,138 | 382,083 | 341,479 | |||||||||||
Research and development and engineering expense | 10,441 | 11,265 | 32,840 | 35,051 | |||||||||||
Selling expense | 26,879 | 27,867 | 83,653 | 86,150 | |||||||||||
General and administrative expense | 36,114 | 33,457 | 112,897 | 105,962 | |||||||||||
Gain on disposal of assets | (460 | ) | (147 | ) | (1,769 | ) | (147 | ) | |||||||
Income from operations | 60,922 | 46,696 | 154,462 | 114,463 | |||||||||||
Loss in equity method investment, before tax | (30 | ) | (13 | ) | (52 | ) | (53 | ) | |||||||
Interest expense, net | (58 | ) | (296 | ) | (332 | ) | (685 | ) | |||||||
Gain (adjustment) on bargain purchase of a business | — | (2,052 | ) | — | 6,336 | ||||||||||
Gain on disposal of a business | — | 443 | — | 443 | |||||||||||
Income before taxes | 60,834 | 44,778 | 154,078 | 120,504 | |||||||||||
Provision for income taxes | 16,473 | 16,581 | 40,202 | 40,972 | |||||||||||
Net income | $ | 44,361 | $ | 28,197 | $ | 113,876 | $ | 79,532 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.96 | $ | 0.60 | $ | 2.46 | $ | 1.67 | |||||||
Diluted | $ | 0.95 | $ | 0.59 | $ | 2.43 | $ | 1.66 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 46,192 | 47,367 | 46,375 | 47,544 | |||||||||||
Diluted | 46,622 | 47,686 | 46,770 | 47,843 | |||||||||||
Cash dividend declared per common share | $ | 0.22 | $ | 0.42 | $ | 0.65 | $ | 0.81 | |||||||
Other data: | |||||||||||||||
Depreciation and amortization | $ | 9,416 | $ | 9,945 | $ | 29,049 | $ | 26,881 | |||||||
Pre-tax equity-based compensation expense | $ | 2,753 | $ | 631 | $ | 8,773 | $ | 11,816 | |||||||
September 30, | December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2017 | |||||||||
Cash and cash equivalents | $ | 166,961 | $ | 204,171 | $ | 168,514 | ||||||
Trade accounts receivable, net | 192,981 | 159,571 | 135,958 | |||||||||
Inventories | 279,503 | 244,476 | 252,996 | |||||||||
Assets held for sale | 9,251 | — | — | |||||||||
Other current assets | 12,220 | 13,276 | 26,473 | |||||||||
Total current assets | 660,916 | 621,494 | 583,941 | |||||||||
Property, plant and equipment, net | 257,679 | 265,178 | 273,020 | |||||||||
Goodwill | 136,459 | 137,313 | 137,140 | |||||||||
Other noncurrent assets | 39,559 | 44,398 | 43,422 | |||||||||
Total assets | $ | 1,094,613 | $ | 1,068,383 | $ | 1,037,523 | ||||||
Trade accounts payable | $ | 42,734 | $ | 30,857 | $ | 31,536 | ||||||
Capital lease obligation - current portion | 1,081 | 1,047 | 1,055 | |||||||||
Other current liabilities | 123,636 | 110,629 | 103,900 | |||||||||
Total current liabilities | 167,451 | 142,533 | 136,491 | |||||||||
Other long-term liabilities - net of current portion | 13,743 | 9,808 | 16,254 | |||||||||
Stockholders' equity | 913,419 | 916,042 | 884,778 | |||||||||
Total liabilities and stockholders' equity | $ | 1,094,613 | $ | 1,068,383 | $ | 1,037,523 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | % | September 30, | % | ||||||||||||||||||
(Amounts in thousands) | 2018 | 2017 | change* | 2018 | 2017 | change* | |||||||||||||||
Net Sales by Reporting Segment | |||||||||||||||||||||
North America | $ | 239,898 | $ | 213,254 | 12.5% | $ | 705,932 | $ | 612,765 | 15.2% | |||||||||||
Percentage of total net sales | 84.4 | % | 81.2 | % | 84.3 | % | 82.2 | % | |||||||||||||
Europe | 42,020 | 47,137 | (10.9)% | 124,096 | 126,752 | (2.1)% | |||||||||||||||
Percentage of total net sales | 14.8 | % | 18.0 | % | 14.8 | % | 17.0 | % | |||||||||||||
Asia/Pacific | 2,260 | 2,085 | 8.4% | 6,936 | 5,828 | 19.0% | |||||||||||||||
Total | $ | 284,178 | $ | 262,476 | 8.3% | $ | 836,964 | $ | 745,345 | 12.3% | |||||||||||
Net Sales by Product Group** | |||||||||||||||||||||
Wood Construction | $ | 238,230 | $ | 224,317 | 6.2% | $ | 710,880 | $ | 639,207 | 11.2% | |||||||||||
Percentage of total net sales | 83.8 | % | 85.5 | % | 84.9 | % | 85.8 | % | |||||||||||||
Concrete Construction | 45,832 | 38,051 | 20.4% | 125,847 | 105,785 | 19.0% | |||||||||||||||
Percentage of total net sales | 16.2 | % | 14.5 | % | 15.0 | % | 14.2 | % | |||||||||||||
Other | 116 | 108 | N/M | 237 | 353 | N/M | |||||||||||||||
Total | $ | 284,178 | $ | 262,476 | 8.3% | $ | 836,964 | $ | 745,345 | 12.3% | |||||||||||
Gross Profit (Loss) by Reporting Segment | |||||||||||||||||||||
North America | $ | 116,968 | $ | 100,861 | 16.0% | $ | 335,497 | $ | 294,955 | 13.7% | |||||||||||
North America gross profit margin | 48.8 | % | 47.3 | % | 47.5 | % | 48.1 | % | |||||||||||||
Europe | 16,034 | 18,068 | (11.3)% | 45,082 | 45,933 | (1.9)% | |||||||||||||||
Europe gross profit margin | 38.2 | % | 38.3 | % | 36.3 | % | 36.2 | % | |||||||||||||
Asia/Pacific | 894 | 209 | N/M | 1,424 | 664 | N/M | |||||||||||||||
Administrative and all other | — | — | N/M | 80 | (73 | ) | N/M | ||||||||||||||
Total | $ | 133,896 | $ | 119,138 | 12.4% | $ | 382,083 | $ | 341,479 | 11.9% | |||||||||||
Income (Loss) from Operations | |||||||||||||||||||||
North America | $ | 56,873 | $ | 41,775 | 36.1% | $ | 151,323 | $ | 110,521 | 36.9% | |||||||||||
North America operating profit margin | 23.7 | % | 19.6 | % | 21.4 | % | 18.0 | % | |||||||||||||
Europe | 3,584 | 5,139 | (30.3)% | 4,783 | 7,443 | (35.7)% | |||||||||||||||
Europe operating profit margin | 8.5 | % | 10.9 | % | 3.9 | % | 5.9 | % | |||||||||||||
Asia/Pacific | 1,132 | (218 | ) | N/M | 1,826 | (341 | ) | N/M | |||||||||||||
Administrative and all other | (667 | ) | — | N/M | (3,470 | ) | (3,160 | ) | N/M | ||||||||||||
Total | $ | 60,922 | $ | 46,696 | 30.5% | $ | 154,462 | $ | 114,463 | 34.9% |
* | Unfavorable percentage changes are presented in parentheses, if any. | |
** | The Company manages its business by geographic segment but is presenting sales by product group as additional information. | |
N/M | Statistic is not material or not meaningful. |